For a change after several contentious issues, Telangana state made peace with Andrha Pradesh or the first time. The issue this time is the division of Input Tax Credit between both the states.Input tax credit is the tax paid on the purchase of goods by a dealer which is normally later settled with the tax payable by him on sale of his goods (output tax) in a particular month.
The liability of the combined State amounts to Rs.1,398 crore at the time of the division. It was proposed that it will be divided between Telangana and AP in the ratio of 58:42 on population basis. But AP disagreed with the division since there are more dealers in Telangana than in AP.
Out of the 80000 dealers, as many as 52,000 were in Telangana and the rest in AP. On the basis of population, Telangana has to pay 587 Crore, but on several discussions, the newest state agreed to pay Rs. 787 crore.